Cost of Health Plan Bureaucracies to Doctors

Prelude: Doctors often complain about time and money wasted interacting with health plan clerks, seeking permission to perform a procedure, do an MRI, or order a laboratory test. The following article, based on a press release from the Commonwealth Fund, vividly illustrates why doctors are justifiably frustrated.

Physician Practice Interactions with Health Plans Cost $31 Billion A Year, Equaling 6.9% of All Spending For Physician And Clinical Services,

New Study FindsPhysicians Spend The Equivalent Of Nearly Three Work Weeks On Health Plan Interactions

NEW YORK (May 14, 2009) — As policymakers consider ways to cut health costs as a part of health reform, a new national survey of physician practices finds that physicians on average are spending the equivalent of three work weeks annually on administrative tasks required by health plans.

According to the study by Lawrence P. Casalino, M.D., Ph.D., Chief of the Division of Outcomes and Effectiveness Research in the Department of Public Health of Weill Cornell Medical College and colleagues, physician practices report that overall the costs of interacting with insurance plans is $31 billion annually and 6.9 percent of all U.S. expenditures for physician and clinical services. The study, published in today's online issue of Health Affairs, was co-funded by The Commonwealth Fund and the Robert Wood Johnson Foundation's Changes in Health Care Financing and Organization (HCFO) Initiative.

Activities Requiring Time and Money

The survey of physician practices across the U.S. inquired about time spent by all practice staff on specific activities, including prior authorization, pharmaceutical formularies, claims and billing, credentialing, contracting, and collecting and reporting quality data. This national survey is the first to ask directly about time spent by non-physician staff on interaction with health plans, and the first to provide data by the type of interaction, type of staff, specialty, and practice size.

On average, physicians spent three hours a week or nearly three weeks per year on these activities, while nursing staff spent more than 23 weeks per physician per year, and clerical staff spent 44 weeks per physician per year interacting with health plans. More than three in four respondents said the costs of interacting with health plans have increased over the past two years.

"While there are benefits to physician offices' interactions with health plans — which may, for example, help to reduce unnecessary care or the inappropriate use of medication — it would be useful to explore the extent to which these benefits are large enough to justify spending three weeks annually of physician time or one-third of the average primary care physician's compensation on physician practice-health plan interaction," said Dr. Casalino. "It would also be useful to explore ways to make the interactions more efficient, both on the health plan side and in physician offices."

Other Study Findings

Other study findings include:

• Physicians — especially primary care physicians — in a solo or two-person practice spent significantly more hours interacting with health plans than physicians in practices with 10 or more physicians.

• Across practices, physicians and their staffs spent substantially more time on authorization, formularies, claims and billing and credentialing than they did on submitting quality data or reviewing quality data provided by health plans.

"Because many providers care for patients insured by numerous private and public plans, they must contend with multiple payment schedules, claims forms and credentialing requirements. These complicated requirements create wasteful excess costs and do little to improve the quality of care," said Commonwealth Fund President Karen Davis. "A high performing health care system is only possible with improved coordination and elimination of waste — not only between physicians and insurers but in all parts of the health care delivery system."

"To get to a health care system that is high-quality and delivers better value for everyone, we have to address the skyrocketing price of health care's administrative costs," said Risa Lavizzo-Mourey, M.D., M.B.A., president and CEO of the Robert Wood Johnson Foundation. "Administrative costs will never be zero, but we need to make sure that administrative interactions improve the quality of care by working to make care safer and more efficient and rewarding health care providers who successfully reduce excessive care and provide the right treatment at the right time."

Study co-authors include Dr. Sean Nicholson, Associate Professor of Policy Analysis and Management at Cornell University in Ithaca; Drs. David Gans, Vice President of Practice Management Resources and Terry Hammons, senior fellow, both at the Medical Group Management Association (MGMA) in Englewood, Colorado; Drs. Dante Morra, CTU director at Toronto General Hospital, and Wendy Levinson, Professor of Medicine, both of the University of Toronto; and Dr. Theodore Karrison, Associate Professor of Health Studies, University of Chicago.

The article is available at http://content.healthaffairs.org/cgi/content/abstract/hlthaff.28.4.w533